Please use the data provided in the excel file and answer the following questions:

a) Compute the following S&P 500, Stock A and Stock B:

i. Monthly returns and Annualized returns

ii. Monthly Standard Deviation and Annualized Standard Deviation.

b) Which stock (Stock A or Stock B) is most risky if they are held alone and not in a portfolio?

c) Now consider the following two portfolios:

X: A portfolio with a weight of 99% in S&P 500 and 1% in Stock A

Y: A portfolio with a weight of 99% in S&P 500 and 1% in Stock B.

Compute the annual standard deviation of portfolio X and Y.

d) How does each stock affect the variability of the portfolio and how does it compare with your answer in (b) above?

e) Perform a regression for each stock on the S&P 500 returns and explain your

i. results in (b) and (c). (Note: When you use the regression function in Excel, Y is the stock returns and X is the S&P 500 returns).

Date	S&P 500	Stock A	Stock B
1/2/13	-1.70%	6.13%	1.66%
2/2/13	-2.31%	9.87%	-13.27%
3/2/13	4.37%	-1.37%	10.55%
4/2/13	-5.06%	6.87%	1.01%
5/2/13	-1.19%	2.17%	-4.26%
6/2/13	-7.15%	-23.97%	-11.37%
7/2/13	-8.23%	1.64%	-9.66%
8/2/13	0.64%	7.71%	7.35%
9/2/13	-10.14%	-31.48%	-15.36%
10/2/13	7.35%	0.57%	-8.18%
11/2/13	5.96%	-4.81%	25.44%
12/2/13	-5.50%	9.09%	-9.91%
1/3/13	-2.46%	0.59%	3.90%
2/3/13	-1.72%	-5.78%	0.92%
3/3/13	0.89%	-19.17%	14.70%
4/3/13	8.12%	-12.68%	15.19%
5/3/13	6.18%	21.02%	0.06%
6/3/13	1.48%	9.15%	9.24%
7/3/13	2.18%	-4.54%	7.78%
8/3/13	2.34%	-3.86%	-1.86%
9/3/13	-1.06%	15.78%	0.97%
10/3/13	5.89%	21.47%	16.70%
11/3/13	1.51%	14.93%	1.42%
12/3/13	4.39%	5.34%	-3.75%
1/4/13	2.20%	1.56%	-7.19%
2/4/13	1.40%	4.52%	10.73%
3/4/13	-1.20%	-1.99%	-0.55%
4/4/13	-2.56%	7.06%	-13.15%
5/4/13	1.24%	-13.23%	4.08%
6/4/13	2.00%	20.27%	-3.36%
7/4/13	-3.88%	6.45%	-4.37%
8/4/13	0.11%	4.93%	1.98%
9/4/13	1.91%	-9.88%	1.46%
10/4/13	1.66%	1.21%	-5.90%
11/4/13	4.43%	9.83%	7.57%
12/4/13	3.34%	3.93%	1.84%
1/5/13	-2.74%	2.32%	1.14%
2/5/13	2.09%	1.90%	7.76%
3/5/13	-1.86%	-1.66%	-3.17%
4/5/13	-2.66%	-3.25%	-7.48%
5/5/13	3.59%	6.34%	6.66%
6/5/13	0.99%	-4.96%	3.02%
7/5/13	4.22%	5.72%	5.53%
8/5/13	-0.78%	0.76%	-5.65%
9/5/13	0.93%	-1.10%	-5.07%
10/5/13	-2.19%	2.38%	-4.12%
11/5/13	3.82%	4.73%	8.39%
12/5/13	0.19%	7.09%	-1.18%
1/6/13	3.90%	6.08%	5.05%
2/6/13	-0.36%	4.96%	-4.29%
3/6/13	1.76%	-0.61%	3.99%
4/6/13	1.15%	3.93%	-6.59%
5/6/13	-3.30%	0.26%	-5.94%
6/6/13	-0.19%	4.88%	-2.32%
7/6/13	-0.28%	9.96%	3.26%
8/6/13	2.30%	2.65%	8.56%
9/6/13	1.81%	-4.76%	12.07%
10/6/13	3.60%	1.92%	13.93%
11/6/13	2.13%	1.71%	3.20%
12/6/13	0.91%	1.91%	1.87%